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The RTD Coffee Category

What are your thoughts on the RTD coffee category? You foresee more, less, or the same cooler space being allocated to this category over the next 12 months? Do you think that RTD coffee is pulling in new customers from those that have been drinking energy drinks, converts from hot coffee, or from a different category altogether?

I think the lines are being blurred if you will. Starbucks, with their Frappacino is the front runner and there has been many others to follow but just didnt have the name recognition to compete against THE NAME in coffee: Starbucks. They essentially own the regular coffee RTD category, IMO. However, with Monster Java, Rockstar Roasted, and others out there being marketed as a coffee flavored ED that is where the lines are blurred.
I see it as being a strong growth segment of the ED category. America, as well as other countries, are hooked on caffeine and it seems the flavor of coffee is still hugely popular.
However, I dont see it it growing at the same overall rate as the ED categroy as a whole but it will prove to be profitable for many companies if they can get the right ingredient/flavor profile.

Your feeling on the rtd coffee market are about the same as mine. The market is definitely much smaller than that of the ED market, but it seems to be growing pretty quickly. I too don't see the explosion that we saw with ED, but more of a consistent growth over the next 5-7 years. The market penetration with rtd coffee is next to nothing in the US, where in other countries (namely Japan) it's over 80%. Seems to me that there is still room for growth, and I also think you make a good point about the lines being blurred. I don't think that anyone is going to be able to take much market share from Starbucks in the straight coffee category, but that the gains are going to come from companies that have some sort of niche, whether it be an energy/coffee blend or something totally different.

My empirical data definitely speaks to the size of the ED market vs. the rtd coffee market. We pulled numbers from a large c-store in an upscale Atlanta neighborhood. Even though my company's beverage was outselling almost every other rtd coffee/energy drink in the store, we're still selling only 1/10th the volume of Red Bull. I suppose it makes sense when you look at the sizes of respective markets from a macro level.

So

What do you guys think about Seattles Best getting into the RTD market. I mean they are owned by Starbucks but I think they are going in as more of a budget offering when compared to Starbucks Frappacino drinks.

I went to your website and I noticed that you sell Whynatte in one of my favorite places to drink when I lived in Atlanta: Vickery's!
If your selling it in Vickery's then I know you must have something with legs!
Good luck!
g

What do you guys think about Seattles Best getting into the RTD market. I mean they are owned by Starbucks but I think they are going in as more of a budget offering when compared to Starbucks Frappacino drinks.

I think most people dont realize that Seattles Best is a value brand of the Starbuck Franchise. Most will think it is just a cheap knock off.
I also think that Frappacino has such a stronghold on the segment that it may just limit its size due to the lack of a real competitor at this time (with all due respect to Whynatte).

Seattle's Best does have name recognition. But unfortunately, that didn't help Coke's Caribou RTD coffees. Coke also tried the indulgent Godiva coffee drinks and Planet Java, with little success. Their latest offering is Illy, but it's in very limited markets, and goes through strong independent distributors with experience in building specialty brands, not through the Coke bottling system.

Even the Starbucks name didn't help the Pepsi offered Italian coffees, they bombed. I am willing to bet that probably 75%+ (maybe even more) of people think only of Frappuccinos when they think of Starbucks.

I wonder if Coke would ever consider bringing the Georgia coffee line to the US.

I think that Seattle's Best may prove to be a smart move for Starbucks. I say this because it allows them to be a player in the discount rtd coffee market without taking anything away from the premium image of the Starbucks brand. They can keep their premium pricing with the Stabucks line, and then attract a new value oriented customer with the Seattle's Best.

Personally, I welcome new brands into the market, at least for now. The market is still so young that new brands, especially those from the Coke's and Pepsi's of the world only help to increase rtd market penetration, and make people aware of the category. This market is far from saturated, and still has a long ways to go.

I may have said it before, but it's a much different market to get into than the traditional ED market. Dairy is much more difficult to work with (it's a pH neutral beverage, which means that you better make sure that it's sterilized properly), it can separate, the production capacity is limited to only a handful of co-packers, and the co-packers that are out there require much larger runs than those that are doing colas or energy drinks. You aren't getting into the rtd coffee market without some solid science and a good chunk of cash. I suppose that this is another reason you don't see nearly as many start up rtd coffees as you do juice/water based ED. I managed to hire a guy who worked R&D for 23 years at Coke - without his help we would never have the product that we have today. We found that most flavor houses have no clue how to formulate and properly manufacture a dairy based beverage.

Coke's had zero success with the coffee. Personally, I thought that the Caribou were undrinkable, I didn't like the taste at all. To me, Godiva (along with Cinnabon) screams "FULL OF CALORIES" - and doesn't really work from a positioning standpoint. Godiva is an incredibly high end brand, and not the kind of brand I see doing well in a convenience store.

If any of you would like to try a sample of the Whynatte Latte, please shoot me a private message and I'll get a few in the mail to you.

Oh yeah, Vickery's is awesome. Good people. They've supported us along the way.

oh, and as for Georgia coffee, this may be an already known fact but I hear Coke sells more Georgia coffee in Japan than they do Coke. Crazy.

Also heard that they've explored the idea of bringing Georgia coffee to the US, but they can't get the "Georgia" trademark in this country. Not sure if this is 100% true, but living in Atlanta you hear a lot of Coke rumors. From what I hear they'd have to name it something different. Also, the taste that works so well in Asia may not work with the US consumer - from my own personal experience with the Asian rtd coffees, they're totally different than those in the US.

"Coke's had zero success with the coffee. Personally, I thought that the Caribou were undrinkable, I didn't like the taste at all. To me, Godiva (along with Cinnabon) screams "FULL OF CALORIES" - and doesn't really work from a positioning standpoint. Godiva is an incredibly high end brand, and not the kind of brand I see doing well in a convenience store."

You are so on point with the statement above. Even though I am aware of the High Claories in the Frappacino products (Mocha is my favorite) I looked at both Godiva and Cinnabon as being truly a "treat" type product and not an everyday drink like I considered the Frapp.

And for the record, I can really appreciate the "science" you bring to the table. Life is more than sugar and carbonated water!!!!